Talking with 891 Breakfast, Prime Minister Julia Gillard said the Premier was right to be concerned about the falling revenues.

"When you look at our budget, we've taken a huge hit to revenues to the amount of tax money that is coming into the government as a result of the economy," PM Gillard said.

"I think people know, from common sense, that it has been a bit of a tough time for business, tough time for company profits, less tax money for the government."

Ms Gillard said she could not supply an exact figure for the forecasted reduction of GST revenue for the state at the time of the interview.

Ms Gillard said in net terms revenue had gone up for the Federal Government, which was counteracted by increases in payments and allowances.

"When you look at the size of our economy and say how much is coming in in tax revenue ... there is far less coming in in tax revenue now than there used to be," PM Gillard said.

"The average increase in spending over five years is 1.3 percent.

"That's the lowest average increase in spending in 25 years."

With the government forecasting switching from a forecasted surplus to $19.4 billion deficit, Prime Minister Gillard said falls could be attributed to drops in terms of trade, a consistently high Australian dollar, falls in company tax revenues and decreases in GST revenue.

"These circumstances have never been seen in Australia's economic history before."

She said in three quarters the rate of nominal GDP (Gross Domestic Product) has been less than the rate of growth in real GDP.

With a large drop in GST revenue predicted, and a $445 million state revenue commitment made yesterday to a planned joint Labor $990 million South Road project, Treasurer Weatherill will face a very difficult first budget.

Mr Weatherill told 891 Breakfast his estimates showed a drop of about $300 million over the following five years.

"It is obviously going to make a state budget that was already a difficult one that much harder."

Treasurer Weatherill said the state budget would be a balance of savings and growth.

With current forward estimates requiring a surplus to fund repayments for the new Royal Adelaide Hospital, Treasurer Weatherill said the reduction would place additional pressure on the state's finances.

"Our revenues have substantially fallen over a number of years, and this is a further downward revision in revenues, so it does make the job harder."

Mr Weatherill said provisions had already been made for anticipated Federal Government co-funded projects which would cover the new South Road project.